FICO score - A complete overview

The term FICO is the short form of Fair Isaac Corporation, who built up the empirical model for credit score calculation. Hence the term FICO got coupled with the score they invented. FICO score is the most popular among all that prevail in the market. The credit system of the country is widely dependent on this model. This is a tool used by creditors to determine the creditworthiness of the consumers. So if one wishes to acquire more credit, it becomes mandatory to understand the system FICO uses, in details.

Three major credit bureaus of the country, namely Experian, TransUnion and Equifax, offer FICO scores, wrapped in their own trade names with hierarchy of versions. For example, Equifax offers Beacon, Beacon 96 and Pinnacle. Empirica, Empirica Auto 95, Precision Score and Precision 03 are calculated by TransUnion. And with Experian, we call it Fair Isaac Risk Score.

These versions are changed and updated according to the market trends. However, few creditors and lenders sometimes prefer using the older version, which they think to be most accurate.

The variables used in your FICO Score calculation

It is needless to say that the exact formulae behind the credit score calculation is a trade secret. However, Fair Isaac has revealed few factors that play significant role in the calculation -

If above points are split, millions of other factors would become visible. Say for example, the word, ‘payment history’ says nothing if the consumer passed through a judgment or filed bankruptcy. Payment history merely means how much punctual an individual is when it comes to paying their bills. But events like judgment, bankruptcy and foreclosure push credit score down the slope. Similarly, numerous credit card accounts might restrict score from going up. Also the term type of credit is not sufficient to describe the saturated credit mix.

Computing FICO score is a statistical method because statistical reports are more believable than speculative data. The FICO scoring system compare all the above information with different pre-experienced results and the score is awarded at last. These are something that requires extensive research and skill. Interact with the community to inspect more on FICO.

Fair Isaac has developed scoring model for United States, Canada and South Africa. However, there is another version "Global FICO"? made for many other countries. A new system, which is going to offer a new score, known as VantageScore, has thrown a challenge to FICO. The old adage "The only constant in the universe is change" is true for everything, however, which one would stand the thrust of time is still a question.